Business planning is a process of designing a road map to the next stages of your business. The planning process is concerned with the definition of a company’s objective and the resources (financial, human, technological) necessary to achieve those objectives.
A business plan is a summary of how an entrepreneur, business manager or owner intends to organize a business endeavor and the strategies to be implemented in order to attain the desired success.
Why should you write a business plan?
A business plan can attract funding to a business. Potential investors, banks, or venture capitalists insist on reviewing a business plan before investing their funds in or lending a business venture. The business plan highlights how the funds invested or loan advanced will be utilized within the business hence helping in identifying business priorities and allocation of scarce resources.
A business plan helps achieve business goals and objectives. A business plan is an effective business management tool that helps identify the current state of a business and the strategic direction that the business intends to take. Business stakeholders need to monitor business progress and the future milestones to be achieved which is highlighted in the business plan.
A business plan can help coordinate the activities of different business units towards a common goal. Many times different departments focus on individual departmental goals without considering the overall organizational goal. This hinders the organization’s success since departments are interlinked and one department’s output could be another department’s input. A good business plan outlines the overall organization goal and the role of each business unit needs to play towards the realization of the overall goal.
Ongoing business planning helps monitor if the business is achieving the set targets. An affective business plan outlines the key performance objectives the business intends to achieve as well as the timelines within which these objectives will be achieved. Regular monitoring of the business plan will inform management whether the business is on track to achieving the set goals.
Having a business plan helps minimize business risk. Business risk is the existence of factors that threaten a company’s ability to achieve financial goals. Creating and regular review of a company’s business plan uncovers weaknesses within the business and external threats to the business thus enabling creation of mitigation strategies.
What should be included in a business plan?
The business plan is a summary of where a business is and where the management wants it to go. The business plan therefore should include strategies and tactics that will enable the achievement of the set objectives.
The plan should include:
- Situation analysis of where the company is currently vis a vis competition. An objective evaluation of the strengths, weaknesses, opportunities and threats (SWOT Analysis) should be undertaken
- Business Objectives to be achieved within a specified period of time, key performance indicators and specific targets.
- Financial forecasts including profit & loss forecasts, cash flow forecasts and sales forecasts.
- Operational Information including location, premises and machinery, suppliers and sources of raw materials.
- Marketing strategies and tactics to gain, maintain or grow the businesses’ market share.
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